EconPol Europe World Economic Survey: Experts Predict Severe Global Recession, With No Growth Until 2021

A global survey of economic experts on the effects of the COVID-19 crisis reveals almost all countries expect a severe recession in 2020, with pre-crisis levels not expected to be reached before 2021. Of available policy options, emergency liquidity assistance to firms and temporary tax deferrals for businesses are deemed to be most effective. Policies such as helicopter money or lenient bank supervision are not thought to be well suited to combat the crisis.

The survey of 1000 economists in 110 countries reveals that almost all experts perceive reductions in investment and consumption to have the strongest impact on their domestic economies. Experts in the US also rate disruption to supply chains as a major factor.

“The extent and duration of this recession is difficult to estimate, as it is uncertain how long the lockdown measures in place will be needed and whether a second wave of infections is likely,” say authors Dorine Boumans, Sebastian Link and Stefan Sauer (EconPol Europe, ifo Institute). “The focus of the survey was to find out if heterogeneous economic effects of the corona pandemic are to be expected, how this affects GDP for 2020 in different countries and whether there is a consensus on when economic growth is back to its pre-crisis levels.”

Experts identified increasing governmental budget deficits, reduced spending on consumption, quarantine measures, closure of companies and disruption of supply chains as strongly hampering economic activity.  As a result, they expect a severe recession in almost all countries in 2020, amounting to a total decline of the global economy by -1.9% in 2020 followed by a long period of economic recovery. Only few countries, including China and India, are expected to still grow at comparably low rates in 2020, but the expectations in these countries are considerably more pessimistic than before the outbreak of the crisis.

Experts in almost all countries expressed severe concerns about increasing governmental budget deficits, with states with high previous debt levels (Japan, Italy, Spain, Belgium and Brazil) citing most concern. However, respondents in Poland, Czech Republic, Romania, Bulgaria, Finland and Colombia were also severely concerned about debt levels, despite having debt levels below 100% of GDP. Experts in countries with relatively low initial levels of public debt, including Switzerland (average of 6.0), the Netherlands (6.1), and Russia (6.2), were considerably less concerned.

The answers of experts from countries with complete lockdown and curfews, including Italy and Spain, rated the economic impact of quarantine measures higher than respondents in other countries, indicating that the severity and duration of lockdown policy has a major influence on the extent of production losses and the resulting declines in GDP.

Read the full report: https://www.econpol.eu/publications/policy_brief_27

For further information, contact boumans@ifo.de, link@ifo.de and sauer@ifo.de